Less Cash, More Equity
I have a quote in today’s Ahead of the Tape column in the WSJ regarding the improving tenor in the markets post-August:
“The S&P 500 already is up nearly 5% this month. The American Association of Individual Investors’ latest weekly gauge of attitudes, released Thursday, showed a 13-point increase in bullish sentiment on top of a 10-point gain the week before. In fact, the Aug. 26 survey, which showed just 20% of investors were bullish on stocks, was the lowest since March 2009. And that marked the start of an aggressive 13-month rally that sent the market up by 80%.
So it isn’t any wonder that investors smell a buying opportunity now. Fusion IQ chief executive Barry Ritholtz, for example, waded back into the stock market last week, reducing his firm’s cash position from 80% to just over 50%.
“[That] does not exactly make us rampaging bulls,” he said. But “we felt we could withstand a little more risk,” given the overly negative sentiment and the prospect of gridlock in Washington following the midterm elections—which typically plays well for Wall Street.
As noted back on September 1, we moved to a 56% cash position, and that has drifted lower over the past 10 days. As I said then, “This is merely a bounce, and when they come along, we want to play.” That makes this a shorter term position — meaning weeks and months, not quarters or years.
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Source:
September to Remember After Grim Summer
KELLY EVANS
WSJ, SEPTEMBER 10, 2010
http://online.wsj.com/article/SB10001424052748703960004575482102043100816.html
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September 10th, 2010 at 7:58 am
Despite the piles of cash available to juice the market, I remain bearish. That’s a longer term position – measured in years not weeks.
September 10th, 2010 at 8:00 am
As I have said since 2001, this is a secular bear market, likely to last anywhere from 10-20 years. My best guess is the new bull market may be dated as starting in 2016 . . .
That is merely a guess — copying the 16 year 1966-82 secular bear
September 10th, 2010 at 8:08 am
I find it to meaningless to read stats like the market is up 5% in August…..What do I do with that, extrapolate that monthly gain to infinity? I am up 10% last week trading, so what……CNBC is the champ at finding the stat that sheds the most favorable light on the markets no matter how misleading it might be.
September 10th, 2010 at 8:33 am
In short, no one has a freekin’ clue. Politics trumps economics, and we lost our minds, politically, some time ago. What, specifically, will the crazy do next? Who knows?
September 10th, 2010 at 8:38 am
And once again, it’s the timing that matters, no? Until someone can accurately gauge that, and then prove it with their results, their really is no one to listen to. For those of us newer guys in the business, this past 10 years has just left us scratching our heads as to what to tell clients. They ask where to put money, and I suppose someone with no scruples would say “Equities Young Man!” But the reality is the s&p is essentially flat since 2001. Where’s the gain for all that risk?
So what do I tell people? The truth. Stocks haven’t been a winner in 401k plans since 2000. In fact, without any further investment on your part, or a company match of any sort, you are probably significantly down from where you where back in those free-love days of the late 90′s.
You’re 10 years older, 10 years closer to retirement, and 10 years closer to needing that money. Avoid stocks in large part of your portfolio.
September 10th, 2010 at 8:51 am
Sold to you Barry Ritholtz!!!!!!
September 10th, 2010 at 8:53 am
“In short, no one has a freekin’ clue.”
Nobody ever does know the future. It used to be that you didn’t buy things like stocks based on guesses about where the price would run in the short-term. You bought them because of the company’s business and because of the dividends they would pay you.
September 10th, 2010 at 9:13 am
BR, now tell us which sectors to be in. If Paul Ryan becomes the finance leader in the House, would healthcare benefit?
September 10th, 2010 at 9:16 am
“You bought them because of the company’s business and because of the dividends they would pay you.”
___________________
Yeah. Dividends. Guaranteed future profits on secure assets. Nothing like knowing the future.
September 10th, 2010 at 9:38 am
I disagree that nobody ever knows the future. I don’t think anybody knows the timing of events in the future, but there are some pretty clear events that will happen. If it weren’t for these future events, everybody would be bullish.
September 10th, 2010 at 9:38 am
Another thought to me is that the only time to truly buy is when a stock is downtrodden and under attack, 52 week low, all that business. That’s the time of maximum risk, to me at least, when the stock is considered a looser, there is some doubt about the company’s ability to continue, etc. It’s a gamble, but it’s a buyers market!
September 10th, 2010 at 9:40 am
I thought it might go to 1160, but now I doubt.
Held the spxu too long. Won’t do that with the upro.
When the momentum change kicks in you can bet it will happen before 9:30 of after 3:45.
Maybe time to throw out ETFs and use puts and calls.
Then its maybe time to get an after hours account.
Or maybe its just time to buy gold and forget about it until what … 2016?
September 10th, 2010 at 9:58 am
The market still seems to be range bound, so that limits opportunities. Traders are looking for obvious puts and calls.
Here’s one to look at. Nokia is in competitive trouble with Apple’s iPhone so they fired their chairman and hired “a Microsoft executive” to lead the company.
http://finance.yahoo.com/news/Nokia-brings-in-Microsoft-rb-4252620616.html;_ylt=Al_tFrxl6oC.nkYR5teXN7m7YWsA;_ylu=X3oDMTE1amVrdnZ0BHBvcwM0BHNlYwN0b3BTdG9yaWVzBHNsawNub2tpYWJyaW5nc2k-?x=0&sec=topStories&pos=2&asset=&ccode=
Are they crazy?
Haven’t they been watching Microsoft lose to Apple. Get a Xerox executive, and a senior Bear Stearns executive, then the self destruction could go even faster.
Dudes – what were you thinking? Fundamentals still count!
September 10th, 2010 at 10:09 am
I appreciate your insights Barry and always look for when you state your cash/stock position as a very important gauge for me. I’m not a trader, but an investor and am therefore sluggish in my ability to move in and out of the market. I followed your market optimism in 2009 which kept me in the market nearly 50% during the big rise and into 2010. I sold off more than half of that, the majority around S&P 1170, when you indicated a move to cash – - that was prescient again on your part (again) and helpful to me. I’ve been about 22%-23% equities since, with most equities in the longer hold 401k account.
I’m willing to buy in to brighter corporate profits than may be expected as a driver for the market – but I’m having trouble overcoming my difficultites envisioning demand materializing to create a self-sustaining improvement. I’d like to be more comfortable with equities but so far remain wary. Your 50% cash position tells me we’re still in a situation that’s hard to read.
September 10th, 2010 at 10:36 am
“Politics trumps economics, and we lost our minds, politically, some time ago. What, specifically, will the crazy do next? Who knows?”
Here is one of those trump cards:
http://www.theatlantic.com/politics/archive/2010/09/fears-for-tears-everyone-wants-to-rule-the-world/62683/
Mohamed v. Jeppesen Dataplan (9th Cir. Sep. 8, 2010)- this case has received little notice in the MSM- wouldn’t want the sheeple to reflect on its implications (or any implications for that matter).
Is the US Fed Govt the facade of a rogue state in the hands of criminals, and if so, can market structure serve two masters?
Happy trading, folks! So throw your hat in the air and sing:
You’re gonna make it after all
You’re gonna make it after all
September 10th, 2010 at 2:30 pm
BR-
are you a market timer?
lol
September 10th, 2010 at 5:56 pm
I to am bearish longer term. But if your bullish, short term, then you should be watching the moving averages carefully.
We are near the top of the trading range we have been in since the top in late April. The markets show weakness, distribution. The accumulation phase failed weeks ago. This is a market that will crap out to the downside with any little fart. I feel there is no reason to be so bullish with all the mountains of risk we face.
The political winds we face are legion. I cant believe we are going to get smooth sailing with a Republican sweep. I am no fan of this socialist/progressive cabal, full disclosure. Grid lock is not what we need, not like in the past, 1994. We need real leadership and stomach! Stomach,you say? Chris Christie backbone. Until we get serious about the under funded union ponzi schemes that are at the core of our problems, well I cant get bullish. If we get real leadership, not afraid to take the pain, then we have a chance. What say you?
Jerry
September 10th, 2010 at 11:57 pm
…the prospect of gridlock in Washington following the midterm elections—which typically plays well for Wall Street.
That currently may *not* be the case for an economy that require more stimulus to keep going.